Anatomy of A Price Hike

Tuesday, April 24, 2007, 11:15 AM: I will use the occasion of yesterday’s price hike to $2.95 — predictable but not predicted by me — to describe the genesis of this price hike.

On Wednesday the 11th, prices jumped to $2.95, and the NYMEX RB price — a good estimate of the wholesale price — was about $2.13. That RB price jumped to $2.16 the next day, but then slipped to $2.04 by Wednesday the 18th. Wholesale prices went down in tandem, and by this past weekend, you could buy gas in town for $2.67, which was less than what the stations paid for the gasoline a few days earlier. But, by the close of business Friday, the RB price was $2.13 again, and the return to $2.95 was on its way. By Monday 8AM, CNBC had an RB price of $2.15, and for sure the e-mail to the stations had already been sent.

Speedway hiked their prices first to $2.95, as they usually do. In some cases, that was a jump of nearly 30 cents! The competitors followed, and Meijer sent out its price hike alert text message. The hike to $2.95 was not uniform, and some places are selling gas today for $2.88. That is because a $2.13 RB price has in the past corresponded to a price hike to about $2.88 rather than $2.95.

Unfortunately, RB prices rose another 5 cents on Monday, and another 4 cents this morning! So, I’m predicting another price hike to $2.99 by the end of the week.

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